4 – Reporting by segment and region

BASF’s business is conducted by thirteen operating divisions aggregated into five segments for reporting purposes. The divisions are allocated to the segments based on their business models.

The Chemicals segment comprises the classic chemicals business with basic chemicals and intermediates. The focus is on cost leadership in the value chains, efficient and reliable production and logistics processes, as well as process innovation. The segment forms the core of BASF’s Production Verbund and is the starting point for a majority of the value chains. In addition to supplying the chemical industry and numerous other sectors, Chemicals ensures that other BASF SEgments are supplied with chemicals for producing downstream products. The Chemicals segment is composed of the Petrochemicals, Monomers and Intermediates divisions.

The Performance Products segment consists of the Dispersions & Pigments, Care Chemicals, Nutrition & Health and Performance Chemicals divisions. Tailored solutions play a key role. They enable our customers to improve the application properties of their products or optimize production processes, for example. Close customer contact and meeting the demanding requirements of a wide range of industries are crucial to business success. As of January 1, 2017, the activities of the Monomers and Dispersions & Pigments divisions for the electronics industry were merged into the global business unit Electronic Materials in the Dispersions & Pigments division within the Performance Products segment. BASF thereby strengthens its position as a strategic partner for the large electronic producers. The 2016 figures have been restated accordingly.

The Functional Materials & Solutions segment bundles system solutions, services and innovative products for specific sectors and customers, especially the automotive, electrical, chemical and construction industries, as well as applications for household, sports and leisure. An in-depth understanding of applications, the development of innovations in close cooperation with customers, and adaptation to different regional needs are key success factors. The segment is made up of the Catalysts, Construction Chemicals, Coatings, and Performance Materials divisions.

The Agricultural Solutions segment includes the Crop Protection division, which is active in the areas of chemical and biological crop protection, seed treatment and water management as well as for nutrient supply and combating plant stress. It offers farmers innovative solutions, including those based on digital technologies, combined with practical advice. Plant biotechnology research is not assigned to this segment; it is reported in Other.

The Oil & Gas segment comprises the division of the same name and focuses on the exploration and production in oil and gas rich regions in Europe, North Africa, Russia, South America and the Middle East. It benefits from strong partnerships and its technological expertise. In Europe, the segment is also active in the transportation of natural gas together with its Russian partner Gazprom.

Activities not assigned to a particular division are reported in Other. These include the sale of raw materials, engineering and other services, rental income and leases, the steering of the BASF Group by corporate headquarters, and cross-divisional corporate research. Cross-divisional corporate research, to which plant biotechnology research also belongs, works on long-term topics of strategic importance to the BASF Group. Furthermore, it focuses on the development of specific key technologies which are of central importance for the divisions.

Earnings from currency conversion that are not allocated to the segments are also reported under Other, as are earnings from the hedging of raw materials prices and foreign currency exchange risks. Furthermore, revenues and expenses from the long-term incentive (LTI) program are reported here.

Transfers between the segments are generally executed at adjusted market-based prices which take into account the higher cost efficiency and lower risk of Group-internal transactions. Assets, as well as their depreciation and amortization, are allocated to the segments based on economic control. Assets used by more than one segment are allocated based on the percentage of usage.

Income from operations (EBIT) of Other (million €)

 

 

2017

2016

Costs for cross-divisional corporate research

 

(379)

(395)

Costs of corporate headquarters

 

(224)

(222)

Other businesses

 

81

39

Foreign currency results, hedging and other measurement effects

 

(28)

(331)

Miscellaneous income and expenses

 

(249)

(182)

Income from operations of Other

 

(799)

(1,091)

Income from operations of Other increased by €292 million year-on-year to minus €799 million. The costs for cross-divisional corporate research decreased by €16 million to €379 million, whereas the costs of corporate headquarters at €224 million were €2 million higher than in the previous year. Income from other businesses rose by €42 million to €81 million. The line item foreign currency results, hedging and other measurement effects increased by €303 million to minus €28 million. This was due to the provisions for the LTI program: Income in the amount of €68 million arising from their partial release in 2017 contrasted with expenses of €267 million from additions to provisions in the previous year. The line item miscellaneous income and expenses amounted to minus €249 million compared with minus €182 million in the previous year.

Assets of Other (million €)

 

 

December 31,
2017

December 31,
2016

Assets of businesses included in Other

 

2,007

1,959

Financial assets

 

606

605

Deferred tax assets

 

2,118

2,513

Cash and cash equivalents/marketable securities

 

6,547

1,911

Defined benefit assets

 

70

66

Other receivables/prepaid expenses

 

2,328

2,320

Assets of Other

 

13,676

9,374

Reconciliation reporting Oil & Gas (million €)

 

 

2017

2016

Income from operations

 

1,043

499

Net income from shareholdings

 

1

6

Other income

 

(126)

(74)

Income before taxes and minority interests

 

918

431

Income taxes

 

(158)

7

Income before minority interests

 

760

438

Minority interests

 

(41)

(76)

Net income

 

719

362

The reconciliation reporting for Oil & Gas reconciles the income from operations in the Oil & Gas segment with the contribution of the segment to the net income of the BASF Group.

Income from operations in 2017 increased significantly in comparison with the previous year. This is primarily attributable to the increase in oil and gas prices, a higher earnings contribution from our share in the Yuzhno Russkoje natural gas field, reversals of impairments in Norway and the Netherlands, and the sale of shares in the Aguada Pichana concession in Argentina. In connection with our share in the Yuzhno Russkoye natural gas field, the excess volumes received over the last 10 years prior to 2016 were compensated in the previous year as contractually agreed with our partner, Gazprom. An impairment regarding the exploration potential in Norway had an offsetting effect.

The Oil & Gas segment’s other income relates to income and expenses not included in the segment’s income from operations, interest result and other financial result. As in the previous year, other income largely consisted of currency effects from Group loans.

Positive income taxes in 2017 were primarily a result of higher income in Norway.

Segments 2017 (million €)

 

 

Chemicals

Perfor­mance Products

Functional Materials & Solutions

Agri­cultural Solutions

Oil & Gas

Other

BASF Group

Sales

 

16,331

16,217

20,745

5,696

3,244

2,242

64,475

Intersegmental transfers

 

6,063

506

805

36

409

(2)

7,817

Sales including intersegmental transfers

 

22,394

16,723

21,550

5,732

3,653

2,240

72,292

Income from operations

 

4,208

1,510

1,545

1,015

1,043

(799)

8,522

Assets

 

13,233

14,432

17,364

8,096

11,967

13,676

78,768

Thereof goodwill

 

56

2,078

3,718

1,929

1,504

68

9,353

other intangible assets

 

103

1,048

2,045

208

804

33

4,241

property, plant and equipment

 

7,497

5,000

4,163

1,366

6,363

869

25,258

investments accounted for using the equity method

 

1,026

369

393

2,556

371

4,715

Debt

 

4,461

5,419

4,385

1,768

2,222

25,757

44,012

Research and development expenses

 

128

395

431

507

46

381

1,888

Additions to property, plant and equipment and intangible assets (including acquisitions)

 

1,149

800

1,056

185

988

186

4,364

Amortization of intangible assets and depreciation of property, plant and equipment

 

1,166

917

706

267

1,026

120

4,202

Thereof impairments and reversals of impairments

 

129

53

28

2

(79)

7

140

Segments 2016 (million €)

 

 

Chemicals1

Perfor­mance Products1

Functional Materials & Solutions

Agri­cultural Solutions

Oil & Gas

Other

BASF Group

1

On January 1, 2017, the Monomers and Dispersions & Pigments divisions’ activities for the electronics industry were merged into the global Electronic Materials business unit and allocated to the Dispersions & Pigments division. For better comparability, the affected figures for 2016 have been adjusted accordingly.

Sales

 

12,905

15,558

18,732

5,569

2,768

2,018

57,550

Intersegmental transfers

 

4,832

469

736

33

331

1

6,402

Sales including intersegmental transfers

 

17,737

16,027

19,468

5,602

3,099

2,019

63,952

Income from operations

 

1,953

1,678

2,199

1,037

499

(1,091)

6,275

Assets

 

13,124

14,911

17,359

8,899

12,829

9,374

76,496

Thereof goodwill

 

61

2,228

3,909

2,093

1,712

70

10,073

other intangible assets

 

136

1,227

2,305

263

1,121

37

5,089

property, plant and equipment

 

7,929

5,365

4,065

1,543

6,678

833

26,413

investments accounted for using the equity method

 

1,027

193

423

2,581

423

4,647

Debt

 

4,532

5,840

4,328

1,853

2,190

25,185

43,928

Research and development expenses

 

145

399

393

489

39

398

1,863

Additions to property, plant and equipment and intangible assets (including aquisitions)

 

1,185

892

3,679

266

1,115

121

7,258

Amortization of intangible assets and depreciation of property, plant and equipment

 

1,161

899

707

268

1,097

119

4,251

Thereof impairments and reversals of impairments

 

86

26

152

29

4

16

313

Regions 2017 (million €)

 

 

 

Europe

Thereof Germany

North America

Asia Pacific

South America, Africa, Middle East

BASF Group

1

The sum of sales including interregional transfers for all the regions can differ from the sum of sales including intersegmental transfers for all the segments, as the segments are viewed globally, and therefore shipments and services between regions within the same segment are not classified as transfers.

Location of customers

 

 

 

 

 

 

 

 

Sales

 

 

29,214

8,359

15,357

14,343

5,561

64,475

Share

 

%

45.3

13.0

23.8

22.3

8.6

100.0

Location of companies

 

 

 

 

 

 

 

 

Sales

 

 

30,778

19,873

15,937

13,658

4,102

64,475

Sales including interregional transfers1

 

 

37,987

25,674

18,570

14,534

4,409

75,500

Income from operations

 

 

4,742

1,913

1,236

2,209

335

8,522

Assets

 

 

43,924

24,631

16,201

13,547

5,096

78,768

Thereof intangible assets

 

 

7,167

2,736

4,428

1,499

500

13,594

property, plant and equipment

 

 

13,876

7,019

5,281

4,337

1,764

25,258

investments accounted for using the equity method

 

 

3,153

989

115

1,447

4,715

Additions to property, plant and equipment and intangible assets (including acquisitions)

 

 

2,455

1,228

958

711

240

4,364

Amortization of intangible assets and depreciation of property, plant and equipment including impairments and reversals of impairments

 

 

2,399

1,234

1,011

516

276

4,202

Regions 2016 (million €)

 

 

 

Europe

Thereof Germany

North America

Asia Pacific

South America, Africa, Middle East

BASF Group

1

The sum of sales including interregional transfers for all the regions can differ from the sum of sales including intersegmental transfers for all the segments, as the segments are viewed globally, and therefore shipments and services between regions within the same segment are not classified as transfers.

Location of customers

 

 

 

 

 

 

 

 

Sales

 

 

26,039

7,412

14,042

12,165

5,304

57,550

Share

 

%

45.3

12.9

24.4

21.1

9.2

100.0

Location of companies

 

 

 

 

 

 

 

 

Sales

 

 

27,221

17,540

14,682

11,512

4,135

57,550

Sales including interregional transfers1

 

 

34,234

23,241

17,060

12,269

4,361

67,924

Income from operations

 

 

3,632

1,582

1,113

1,098

432

6,275

Assets

 

 

40,086

21,120

17,714

12,869

5,827

76,496

Thereof intangible assets

 

 

7,925

3,249

5,048

1,661

528

15,162

property, plant and equipment

 

 

13,990

6,915

6,055

4,421

1,947

26,413

investments accounted for using the equity method

 

 

3,052

1,120

119

1,476

4,647

Additions to property, plant and equipment and intangible assets (including acquisitions)

 

 

4,114

2,912

1,424

1,437

283

7,258

Amortization of intangible assets and depreciation of property, plant and equipment including impairments and reversals of impairments

 

 

2,526

1,224

1,018

463

244

4,251

In the United States, sales to third parties in 2017 amounted to €13,909 million (2016: €12,831 million) according to location of companies and €13,127 million (2016: €11,985 million) according to location of customers.

In the United States, intangible assets, property, plant and equipment, and investments accounted for using the equity method amounted to €9,014 million compared with €10,342 million in the previous year.